All prime ministers exaggerate. Ministers often get policy details wrong. But few have done so as insouciantly as
Tony Abbott
and his cabinet colleagues.

The Prime Minister was in top form on Tuesday with his enthusiastic response to US President
Barack Obama
’s new plan to cut greenhouse gas emissions from coal-fired power stations by 30 per cent below 2005’s level by 2030.

Abbott’s response (discussed below) follows his dubious claim after the budget that its proposed $7 co-payment on visiting a GP will reduce the deficit – $5 is quarantined until 2020 in a research fund and the doctor gets $2. The Treasurer,
Joe Hockey
, wrongly claimed no one with a healthcare plan will pay the $7. The Education Minister,
Christopher Pyne
, wrongly claimed that interest on student debt would not apply to existing graduates.

Obama is unlikely to criticise Abbott’s stand on global warming as too soft during their scheduled meeting on Thursday. But Abbott stretched the point when he told Parliament on Tuesday the United States and Australia had “common" policies on climate change.

“What the United States is doing is taking sensible direct action steps to reduce its emissions which is exactly what this government is proposing to do," he said.

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The Environment Minister,
Greg Hunt
, went further when he welcomed the US initiatives because, like Australia’s, they provide a “means for power stations to be cleaned up".

However, unlike the US, the government’s direct action plan does not regulate a cut in emissions from coal-fired stations, let alone by 30 per cent, as Obama’s plan proposes.

More effective option

Abbott plans to establish an Emissions Reduction Fund to eventually pay a total of $2.5 billion to companies that win a “reverse" auction by offering the biggest cut to emissions. The more effective option would be to focus on private/public funding of research and development to make “clean" technologies cheaper than “dirty" ones.

Whether any coal-fired station will bid in the reverse auction, let alone successfully, is unclear. Either way, Hunt is drawing a long bow to imply that Australian stations will cut their emissions by anything like the US requirement. Meanwhile, more funding will probably be needed for the direct action plan to meet the government’s target of cutting overall emissions by 5 per cent by 2020.

Abbott noted that the US and Australian federal governments’ approaches do not include a carbon tax or an emissions trading scheme. On Wednesday, however, he rejected Obama’s desire that he put climate change on the agenda for the G20 talks Australia is hosting in Brisbane in November.

The government is right to reject widespread assertions that an ETS is the only economically efficient way to cut emissions because it “puts a price on carbon". A government cap on emissions, not the market, does all the cutting in an ETS. Government-created synthetic financial products, based on emissions permits, are then traded in a government-created artificial market. The permit price is intrinsically volatile, making it harder for businesses to switch to low-emissions technologies. The European Union’s emissions price has fallen from more than €30 ($44) a tonne to about €5.5.

The Labor government’s start-stop-start policy began with a carbon tax of $23 a tonne, rising to $25.40 on July 1, 2014 (unless Abbott can repeal it before then). Having started high, Labor then promised to tie the price to the much lower European Union figure if it won the 2013 election. Meanwhile, it spent more than the tax raised to compensate households and industries. Not a cent went to R&D.

Cheaper energy

Obama should easily achieve his target. Shale gas is replacing coal in the US. Many technologists expect solar power will also be cheaper than coal in the US by 2020. Within a few years, big advances in battery efficiency and storage are expected to reduce the growth in electricity generation from any source.

The latest Lowy Institute poll suggests Abbott will need to show direct action works and give more support to international efforts to cut emissions. In what the institute calls “a striking shift of public opinion", 45 per cent of Australians now see global warming as a “serious and pressing problem", up nine points since 2012. This reverses polls that showed declining concern about climate change between 2006 and 2012. Moreover, 63 per cent say the government “should take a leadership role on reducing emissions" and only 28 per cent say it should wait for an international consensus.

The results could make it harder for Abbott to break his pre-election promise to maintain the renewable energy target. He might get a better reaction if he promoted the budget’s indexing of the fuel excise to the consumer price index as a climate change measure in which a rising excise acts as a modest carbon price, as well as a revenue raiser.

The change will add about 1¢ a year to a petrol price that varies by up to 18¢ a litre in any month. The impact is also moderated by much better fuel efficiency of new cars since indexation was dropped in 2001. Labor should support the change, but won’t. The Greens should, but mightn’t.

At this stage, there seems little danger Abbott will exaggerate the importance of a higher excise in curbing climate change.